The combination of American Airlines and smaller rival US Airways (LCC) creates the world's largest carrier by revenue and passenger traffic, valued at about $11 billion, The airlines on Thursday confirmed the deal, which was widely reported Wednesday night. The combined carriers will keep American Airlines' name, with US Airways' CEO Doug Parker leading the new airline. It will be headquartered in the Dallas-Fort Worth region, American's current home base.
The deal still needs approvals from the court overseeing American parent AMR Corp.'s bankruptcy, as well as nods from regulators and US Airways shareholders. The companies think the merger will close in the third quarter.
"American Airlines is one of the world's most iconic brands," Parker said in a statement Thursday morning. "The combined airline will have the scale, breadth and capabilities to compete more effectively and profitably in the global marketplace.
The airlines touted the savings they'll see from combining both networks, as well as the deal pipelines for new jets from Boeing (BA) and European rival Airbus.
US Airways shares were down 7.5% intraday on the stock market today.
Buying an airline out of bankruptcy is not unfamiliar ground for US Air. America West bought then-bankrupt US Airways in 2005 in a reverse merger that kept the US Air name, but most of the America West leadership.
US Air followed up shortly later with a failed hostile bid for Delta Air Lines (DAL) in 2006.
This deal will likely cap this latest round of mega airline mergers. Large carriers have looked to grow larger to lower costs through economies of scale, and to compete with more nimble discount carriers or regional fliers.
United Continental Holdings (UAL) formed in 2010 from the merger of United Air Lines and Continental Airlines. Delta, currently the world's largest airline, absorbed Northwest Airlines in 2008. The new combined American and US Air will be larger than those two.
United shares were down 3.3% intraday. Delta slid 3.9%.
Southwest Airlines (LUV), another major U.S. carrier, was down 1.8% intraday.